The MSMED Act, 2006 defines the Micro, Small and Medium Enterprises based (i) on the investment in plant and machinery for those engaged in manufacturing or production, processing or preservation of goods and (ii) on the investment in equipment for enterprises engaged in providing or rendering of  Services.

The investment in plant and machinery is the original cost excluding land and building and other items specified by the Ministry of Small Scale Industries.

All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and get qualified for the benefits provided under the Act.

The limit for investment in plant and machinery / equipment for manufacturing / service enterprises:

Manufacturing Sector
Enterprises	 Investment in plant & machinery
Micro Enterprises	Does not exceed twenty five lakh rupees
Small Enterprises	 More than twenty five lakh rupees but does not exceed five crore rupees
Medium Enterprises	  More than five crore rupees but does not exceed ten  crore rupees
Service Sector
Enterprises	 Investment in equipments
Micro Enterprises	  Does not exceed ten lakh rupees:
Small Enterprises	   More than  ten lakh rupees but does not exceed two crore rupees
Medium Enterprises	    More than two crore rupees but does not exceed five core rupees

Advantages:

1. Easy finance availability from Banks, without collateral requirement
2. Credit prescription (Priority sector lending), differential rates of interest etc.
3. Lower rates of interest
4. Excise exemption scheme
5. Exemption under Direct Tax Laws and statutory support such as reservation and the interest on Delayed Payments Act.
6. Generating employment opportunities
7. To encourage the small-scale units, the SEZs are required to allocate 10 per cent space for the small-scale unit.
8. Timely payment for goods and services by buyers to MSMEs
9. Protection against delay in payment from Buyers and right of interest on delayed payment
10. Preference in procuring Government tenders
11. Concession in electricity bills
12. Statutory support such as reservation and the Interest on Delayed Payments Act.